Truthfully speaking, there is always a risk when you invest. However, sometimes, the greater the risk, the greater the return. Hence, there are still lots of investments happening in the economy. In this article, we will walk through the steps you need to follow before you make an investment.
Step 1: Review finances
- List current assets (what you own) including superannuation, properties, savings, vehicles, jewelry, home contents and any other investments
- Write down your debts (what you owe) including any loans, HECS, credit card debt, car loan debt
- List your income and monthly living expenses (e.g. phone, utility, food etc)
Step 2: Set goals
Step 3: Understanding investment risks and your risk tolerance
- First – understand the type of risks: interest rate risk, market risk, currency risk, liquidity risk, timing risk, inflation risk or gearing risk
- Second – risk tolerance: How much risk are you comfortable with
Step 4: Investment options
- What is the anticipated return on investment and is it purely driven by income from the investment or capital growth over time?
- How much time will it take to access your cash in case you sell the investment?
- Cost of buying and exiting – are there any legal or brokerage costs involved?
- How long do you need to retain the investment to get the expected return?
- What are the types of risk involved and do they fall within your tolerance?
- What are the tax implications on your earnings from the investment?
Step 5: Build your portfolio
Step 6: Monitoring investments
Investments can be promising especially when it generates great return. Nevertheless, we need to always remember that there’s a financial risk associated with investments. If you need free personalised financial advice on how to maximise your return through investments, then don’t hesitate to get in touch with us.
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.